A large company: stop the cost shifting.

• Author: Swaim, Lloyd B.
• Position: Cutting medical costs - Employee Benefits

Health-Care Cost Per Employee: $3,000

Gillette is a global consumer products company with 1993 sales of $5.4 billion. We have 33,400 employees worldwide, but only about 7,000 are in the United States, so we aren't one of the largest payors of national health-care costs. Still, we're concerned with the double-digit cost increases we've been experiencing.

That's why we aren't waiting for reform, although we watch the developments in Washington with great interest. Managed care has been part of Gillette's program for several years, initially in the form of health-maintenance-organization offerings. We've found HMOs very effective in controlling costs, and we've also observed that our newer and younger employees tend to choose an HMO plan. In fact, 62 percent of our California employees and 38 percent of our Massachusetts employees have selected HMOs.

However, this trend has adversely affected our indemnity plan, so in 1993, we redesigned the program to incorporate more managed-care features. The indemnity plan flow offers "high" and "low" options, which allow employees to choose the level of co-insurance they're comfortable with. Under the high-option plan, employees pay approximately 30 percent of the premiums, but their deductible is only $150, and most charges are completely covered. With the low-premium plan, employees pay only about 10 percent of the total premiums, but their deductible is $500, and most medical expenses are covered at only 80 percent. Ninety-six percent of our U.S. employees have chosen the high-option plan.

We've also eliminated indemnity-plan flaws that encouraged more costly treatments. For example, we used to have a higher deductible for doctor's office visits than we did for outpatient hospital services. That encouraged employees to go to a hospital for treatment, even if a physician could treat them just as effectively in an office. Now there's a small co-payment for doctors' office visits, while a cash deductible applies to outpatient treatment.

Gillette's in-house medical facility is an important part of our health-care program. This well-staffed center has helped us reduce our medical costs. For example, annual physicals allow us to detect problems early, before they become serious. Other preventive-care measures include mammograms and blood-pressure and cholesterol screening.

The medical department has also contracted with an outside vendor to provide a company-subsidized...